The change of direction took place earlier this year from looking at explosive high impact wells which are make or break, to extracting maximum oil from existing wells to build cash flow which will then fund the high impact wells.
Since the chance, the production profile has been: March - 2,002 barrels
April - 3,336 barrels (up 40%) - CF positive
May - 3,811 barrels (up 14%) - CF positive
Guidance for June is to exceed May, so that will be a full quarter of CF positive production.
Note they've also made efforts to reduce costs so IMO we will be in for a very pleasant surprise on how much CF positive this has been in the current quarter.
Further, it seems they are now beginning to step out a little from this core effort to enhance value in the field. This below quote has me very intrigued
The other thing to note is that the company is cheap... it has c. $1m cash & the EV is c. $4m
For an Oil & Gas producer which is now CF positive & a growing production profile, IMO the risk / reward stacks up well & truly in the favour of reward. Sure, there are risks, but IMO upside far outweighs downside.
The market will also begin to reward the company as it has delivered consistency by way of continual MoM increases in production.
Finally, with the wells themselves, they have been pumped for a long, long time. So they are pretty much at steady rates of production with boosts coming from work-overs which we are seeing. Traditionally, when these types of wells are drilled, they experience large declines in rates of flow (bc of the geology of the well). However, these wells which are producing have already experienced those large decline rates and are now at the slow, steady & constant production rates.
To put rough & dirty numbers behind this, there were 3,811 barrels produced in May across 34 wells. So on average, that's 112 barrels of oil per well, divide by the 31 days in May equates to 3.6 barrels of oil, per well, per day.
In my experience, when these types of wells are first brought in to production, they can produce somewhere between 20-50bbls/day which is 620-1550 bbls a month each. As you can see, they are at the tail end of their production decline & as such, will be consistent which is exactly what FPL want. They can 'Bank' on the consistent cash flow positive nature of the fields to fund the new wells or explosive type targets of oil or gas.
Again - all IMO - but I see the upside risk here much greater than the downside risk. Especially now as the TA side of the equation is coming to the party with the chart having a very nice 6-mth basing pattern.
FPL Price at posting:
0.9¢ Sentiment: Buy Disclosure: Held
